subsidiaries of Southern owned a 24.975% interest in a limited
partnership, which in turn operated two synthetic fuel plants in
Illinois for eight months in 2001. (Supplemental Resp. Opp’n Mot.
Dismiss Cross-cl. Ex. A at 5.) Ownership by subsidiaries of a
minority interest in a partnership operating in Illinois for eight
months (an operation that ceased prior to this lawsuit) does not
constitute continuous and systematic contact by Southern with
Illinois.

Finally, Insurers also point out that Southern entered into a
number of insurance contracts with Continental Casualty Company and
Columbia Casualty Company (who were, recall, the original
plaintiffs in this litigation), and that those insurers are both
Illinois corporations. An out-of-state party’s contract with an
in-state party, however, does not alone establish minimum contacts.
Hyatt Int’l Corp. v. Coco, 302 F.3d 707, 716 (7th Cir. 2002)
(citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478 (1985)).
Contract terms and the parties’ course of dealing need to be
considered when determining whether the out~of-state party
purposefully availed itself of the privilege of conducting
activities in the forum such that personal jurisdiction may be
exercised over it. Id. Insurers point to no such additional
evidence, and the fact that Southern entered into contracts with
Illinois corporations, which are not at issue here, does not

establish sufficient minimum contacts by Southern with Illinois.

13


indeed, could not--dispense with the Article III case or
controversy requirement. Nationwide Ins. v. Zavalis, 52 F.3d 689,
691-92 (7th Cir. 1995). The case or controversy requirement “keeps
federal courts in the business of resolving existing legal disputes
and out of the business of offering advice on the legality of a
proposed course of action.” Deveraux v. City of Chicago, 14 F.3d
328, 330 (7th Cir. 1994). While the distinction between an Article
III controversy and an abstract question of law is necessarily one
of degree, and the Seventh Circuit has acknowledged the difficulty,
if not impossibility, of drawing a bright line, id., the Supreme
Court has outlined the broad parameters of a justiciable
controversy:
The controversy must be definite and concrete, touching the
legal relations of parties having adverse interests. It must
be a real and substantial controversy admitting of specific
relief through a decree of a conclusive character, as
distinguished from an opinion advising what the law would be
upon a hypothetical set of facts.
Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-41 (1937) cited
in Deveraux, 14 F.3d at 330-31.
The dispute here is an Article III controversy. While
Southern asserts that there is no current controversy between the
parties because it is not making a demand under the Insurers’

policies at this time, the Insurers have submitted evidence

indicating that Southern has made various demands under the


II. Personal Jurisdiction

For a federal court sitting in Illinois exercising diversity
jurisdiction, the personal jurisdiction issue essentially boils
down to an inquiry into whether a defendant has certain minimum
contacts with Illinois such that maintenance of the suit does not
offend traditional notions of fair play and substantial justice.
See MAC Funding Corp. v. Northeast Impressions, Inc., 215 F. Supp.
2d 978, 979-80 (N.D. Ill. 2002) (Bucklo, J.) (describing how the
traditional three-part inquiry into state long-arm statute, state
constitutional law, and federal constitutional law collapses in
Illinois into a single federal constitutional inquiry into minimum
contacts). Insurers have the burden of demonstrating the existence
of personal jurisdiction over Southern. RAR, Inc. v. Turner
Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997). Thus, Insurers
must establish that Southern has sufficient minimum contacts with
Illinois. In their original brief opposing Southern’s motion to
dismiss, Insurers pointed to Alderson v. Southern Co., 747 N.E.2d
926 (Ill. App. Ct. 2001), an Illinois case in which the court found
Southern subject to general personal jurisdiction in Illinois.

In Alderson, the court found that Southern maintained
continuous) and systematic business contacts with Illinois

sufficient to permit the exercise of general personal jurisdiction



and claim” and that it “acknowledge coverage of this claim,
investigate this claim, indemnify and, if provided under the policy
or policies issued by American Home Assurance Company, defend your
insured and pay your insured’s costs connected with this claim.”
(Id. Ex. FP.)

Similar or identical letters were sent to other of the
Insurers as well. The November 23, 1999 letter describing the
lawsuit filed by the United States was sent to National Union and
Granite State. (Id. Ex. E.) The November 18, 1999 letter
describing Georgia’s belief that a Southern subsidiary was
responsible for environmental contamination was sent to Highlands.
(Joinder Mem. Opp’n Mot. Dismiss Cross-cl. Ex. A.) A November 7,
2001 letter was also sent to Highlands describing an asbestos
exposure lawsuit, requesting that Highlands “accept this letter as
notice of an occurrence and claim” and “acknowledge coverage of
this claim, investigate this claim, indemnify and, if provided for
under the policy or policies issued by Highlands Insurance Company,
defend your insured and pay your insured’s costs connected with

this claim.” (Id.)?

2 No evidence was submitted establishing a controversy
between Southern and Federal. Absent an Article III controversy
between Southern and Federal, I have no subject matter jurisdiction
over Federal’s crossclaim and should remand to the state court.
However, because (as discussed below) I find that there is no
personal jurisdiction over Southern in Illinois based on federal
constitutional principles, and because Southern’s removal was
nonfrivolous, I may dismiss Federal’s crossclaim for lack of
personal jurisdiction despite the fact that technically remand is

6


policies.' A November 18, 1999 letter from Southern’s counsel to
American Home describes a belief by the Georgia Department of
Natural Resources Environmental Protection that a Southern
subsidiary may be responsible for environmental contamination. The
letter requests that American Home “accept this letter as
Southern’s formal notice of a claim” and that American Home
“acknowledge coverage of this claim, investigate the claims,
indemnify and, if provided under your policy(s), defend your
insured and pay your insured’s costs connected with this claim.”
(Mem. Opp’n Mot. Dismiss Cross-cl. Ex. D.) A November 23, 1999
letter from Southern to American Home describes a lawsuit filed by
the United States against Southern for violations of the Clean Air
Act, as well as a “Notice of Violations” issued to Southern by the
EPA, Again, the letter asks American Home to “accept this letter
as Southern’s formal notice of a claim” and to “acknowledge
coverage of this claim, investigate the claims, indemnify and, if
provided under your policy(s), pay your insureds’ defense costs
connected with this claim.” (Id. Ex. E.) A November 7, 2001
letter was also sent from Southern to American Home describing a
lawsuit filed against Southern by parties alleging exposure to
asbestos at two of Southern’s power plants. This letter also asks

that American Home “accept this letter as notice of an occurrence

1 In determining whether I have subject matter jurisdiction,
I may consider pertinent evidence submitted by the parties.
Sapperstein v. Hager, 188 F.3d 852, 855 (7th Cir. 1999).

5


a number of years. In a declaratory judgment action brought by one
of the insurers (“Atlanta”), the district court dismissed for lack
of subject matter jurisdiction, finding no actual controversy
between the parties. The Seventh Circuit affirmed. Atlanta had
provided only a single year of coverage to the insured, and based
on a statute of limitations ruling in the Sherman Act case, the
verdict was premised on conduct occurring after that year. There
was thus substantial uncertainty as to whether insured’s liability
would be based on occurrences during Atlanta’s policy year.
Consequently, the Seventh Circuit noted that “[t]here is no
definite indication that Atlanta was actually expected to pay
anything as a result of the letter. Atlanta knew there had been no
determination as to what policy years were affected. This
notification from [insured] is a far cry from a demand for payment,
or even a threat to make a demand for payment.” Id. at 84.

Here, in contrast, there was a definite indication that the
Insurers were actually expected to pay something. All the letters
discussed above expressly requested indemnification from the
Insurers, and if applicable, payment of Southern’s defense costs.
Atlanta International is thus not applicable. Because there exists
an Article III controversy and the statutory requirements for the
exercise of diversity jurisdiction have been met, I have subject

matter jurisdiction over this case and it was properly removed.


ited States District Court, Northern District of Illinois

Elaine E. Bucklo sien, pena oer
02 C 7683 DATE 9/25/2003

Continental Casualty Co., et al. vs. The Southern Co., et al.

[In the following box () indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

MOTION: of the motion being presented.]

DOCKET ENTRY:

qQ) a Filed motion of [ use listing in “Motion” box above.]

(2) Qo Brief in support of motion due___.

(3) Q Answer brief to motion due__. Reply to answer briefdue___.

(4) Oo Ruling/Hearing on setfor at

(5) oO Status hearing[held/continued to) [set for/re-set for] on setfor_ at

(6) qa Pretrial conference[held/continued to] [set for/re-set for]on__—_—ssetfor at.

(7) a Trial{set for/re-set for}on__ at

(8) a (Bench/Jury trial] {Hearing] held/continuedto__—_at

(9) a This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OOFRCP4(m) OLocal Rule 41.1 CFRCP41(aX1) O FRCP41(a)(2).

(do) = [Other docket entry] | Enter Memorandum Opinion and Order granting the Southern Company’s

motion to dismiss (6-1) the cross-claims for lack of personal jurisdiction. The docket clerk is directed
to terminate document number 4-1 as moot. Any pending motion in this case is terminated as moot.

(1) @ {For further detail see order attached to the original minute order.]
No notices required, advised in open court.
No notices required,
VY | Notices maited by judge’s staff.
Notified counsel by telephone.
Docketing to mail notices.
vw | Mail AO 450 form. Lyunoa LOWLSIO ‘sn
Copy to judge/magistrate judge. Mygia
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courtroom ‘S29 Wd SZ d3Se0
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supplemental response brief citing three additional facts that they
believe indicate that Southern maintains continuous and systematic
contacts with Illinois: (1) Southern purchases significant amounts
of coal from Illinois mines, (2) Southern serves as a guarantor on
various transactions by Mirant, and (3) Southern owned and operated
two synthetic fuel plants in Illinois.‘

During 2001 and 2002, Southern was involved in at least eight
contracts to purchase unspecified amounts of coal from mines in
Illinois. (Supplemental Resp. Opp’n Mot. Dismiss Cross-cl. Ex. D
at 5-10.) At least two of these agreements were in effect in
February 2002 when this suit was filed. (Id. at 5-7) (one contract
in effect from January 1, 2000 through December 31, 2002; another
contract in effect from July 1, 1994 through December 31, 2007).
However, although the purchased coal came from Illinois mines, the
purchase agreements were negotiated with non-Illinois companies.
(Id. at 5-10) (companies providing the coal were the American Coal
Sales Company in Lexington, Kentucky; the Peabody COALSALES Company
in St. Louis, Missouri; Emerald International Corporation in
Florence, Kentucky; Peabody COALTRADE, Inc. in St. Louis, Missouri;

and Consolidated Coal Company in Atlanta, Georgia). Regardless,

4 In determining whether personal jurisdiction exists while
deciding a motion to dismiss, I am not limited to consideration of
the pleadings, but may examine discovery materials. See 4 Charles
Alan Wright & Arthur R. Miller, Federal Practice and Procedure
§ 1067.6 (3d ed. 2002); Jobe v. ATR Mktg., Inc., 87 F.3d 751, 753
(5th Cir. 1999).

11


over it.> The evidence in Alderson established that Southern is a
holding company doing business through subsidiaries. Several of
those subsidiaries (collectively “State Line”) owned and operated
a power plant in Hammond, Indiana on the Indiana/Illinois border.
In a personal injury case involving an explosion at the State Line
plant, the Alderson court found Southern subject to general
personal jurisdiction in Illinois. This finding was based on the
fact that State Line had committed to sell the plant’s electrical
output to an Illinois utility company exclusively for fifteen
years. Alderson, 747 N.E.2d at 947. As Southern pointed out in
its original reply brief, however, Southern Energy, Inc. n/k/a
Mirant Corporation (“Mirant”), a subsidiary that owned the State
Line subsidiaries, was spun off from Southern in April 2001, more
than ten months prior to the original filing of this suit in
February 2002. (Reply Supp. Mot. Dismiss Cross-cl. at 9.)
Insurers’ reliance on the Alderson decision is therefore misplaced.
Cf. Klinghoffer v. S.N.C. Achille Lauro, 937 F.2d 44, 52 (2d Cir.
1991) (“[General] personal jurisdiction depends on the defendant's
contacts with the forum state at the time the lawsuit was filed.”).

Following jurisdictional discovery, Insurers filed a

3 “Continuous and systematic” is the test for minimum
contacts in a case where general (as opposed to specific) personal
jurisdiction is at issue. Because the present dispute does not
relate to any alleged contacts that Southern has with Illinois,
only general personal jurisdiction is at issue. See RAR, 107 F.3d
at 1277 (citing Helicopteros Nacionales de Colombia, S.A. v. Hall,
466 U.S. 408, 414 n.8, 416 (1984)).

10



These letters establish that a definite and concrete dispute
“touching the legal relations of parties having adverse interests”
exists such that the Article III case or controversy requirement is
satisfied. See Am. Home Ins. Co. v. Martin, No. 92 C 1377, 1992 WL
123132, at *3 (N.D. Ill. May 28, 1992) (Nordberg, J.) (“Several
cases in this district have addressed, in declaratory judgment
actions [between insurers and insureds], issues of liability
coverage or limits of liability even though the underlying
adversary proceedings had not been resolved.”). The most analogous
case cited by Southern in support of its position that there is not
presently a case or controversy before me is Atlanta International
Insurance Co. v. Atchison, Topeka & Santa Fe Railway Co., 938 F.2d
81 (7th Cir. 1991). In that case, an insured had sent a letter to
nearly 170 of its insurers notifying them that a $750 million
verdict had just been awarded against it. The letter noted a
prospect for settlement discussions, soliciting the insurers’ views
and inviting their participation. An informational meeting
sponsored by the insured made clear that no decision had been
reached on which policy years were implicated by the verdict, which

had been made in a Sherman Act case alleging a conspiracy spanning

called for. See Asociacion Nacional de Pescadores v. Dow Quimica,
988 F.2d 559, 566-67 (5th Cir. 1993) (affirming dismissal for lack
of personal jurisdiction despite concluding that district court
should have remanded for lack of subject matter jurisdiction
instead), cited with approval in Ruhrgas AG v. Marathon Oil Co.,
526 U.S. 574, 586-87 (1999).


Southern now argues that this case is not ripe, which is an issue
of subject matter jurisdiction. Smith v. Wisconsin Dep’t of
Agric., Trade & Consumer Prot., 23 F.3d 1134, 1142 (7th Cir. 1994).
The proper remedy for lack of subject matter jurisdiction in a case
removed from state court is not dismissal, however; it is remand.
28 U.S.C. § 1447(c) (“If at any time before final judgment it
appears that the district court lacks subject matter jurisdiction,
the case shall be remanded.”); Smith, 23 F.3d at 1142 (vacating
district court’s dismissal of removed case for lack of subject
matter jurisdiction, instructing district court to remand instead) .
Southern cannot have it both ways. Either I have subject matter
jurisdiction and the case was properly removed, or I do not have
subject matter jurisdiction and the case must be remanded to state
court. I may not dismiss this case for lack of subject matter
jurisdiction.

As both sides admit that there is complete diversity here and
the jurisdictional amount is met (and I have no reason to doubt
either assertion), the only issue relating to subject matter
jurisdiction is ripeness. Insurers’ crossclaims seek a declaration
that they have no obligation to provide coverage for Southern’s
environmental contamination and asbestos exposure claims. The
Declaratory Judgment Act, 28 U.S.C. § 2201, permits me to “declare
the rights and other legal relations of any interested party

seeking such declaration.” This statute, however, does not-~


Even when considered together, the contacts pointed to by
Insurers--the former ownership of Mirant, the purchases of Illinois
coal, the guarantee of Mirant transactions, the minority interest
in an operator of synthetic fuel plants, and the contracts with
Illinois corporations--do not constitute continuous and systematic
contacts with Illinois by Southern. The Supreme Court’s decision
in Helicopteros “suggests very strongly that the threshold contacts
required for a constitutional assertion of general jurisdiction
ever a nonresident defendant are very substantial, indeed.” 4
Wright & Miller, § 1067.5. See also Wilson v. Humphreys (Cayman),
Ltd., 916 F.2d 1239, 1245 (7th Cir. 1990) (noting that Helicopteros
established “a fairly high standard in practice”). Southern’s
contacts with Illinois fail to meet this high threshold.

III. Conclusion

While this case was properly removed, crossclaimants fail to
establish that crossclaim defendant has sufficient minimum contacts
with Illinois such that I may exercise personal jurisdiction over

it. Crossclaim defendant’s motion to dismiss is therefore GRANTED.

TER ie ?

Elaine E. Bucklo
United States District Judge

Dated: September Jo~, 2003

14


respect to various environmental contamination and asbestos
exposure allegations that had been leveled against Southern.
American Home, Federal, Granite State, Highlands, and National
Union (collectively “Insurers”) all filed crossclaims against
Southern, and all Insurers but Federal filed counterclaims against
CNA. Northwestern also filed a crossclaim against Southern and a
counterclaim against CNA. CNA and Southern subsequently entered
into a settlement agreement that resulted in dismissal of CNA’s
claims against all defendants, leaving only the counterclaims and
crossclaims. Southern removed the case to federal court.
Following removal, Northwestern voluntarily dismissed its
counterclaim and crossclaim, and Insurers voluntarily dismissed
their counterclaims, leaving only Insurers’ crossclaims against
Southern to be decided. Southern now moves to dismiss the
crossclaims for lack of subject matter jurisdiction, lack of
personal jurisdiction, and improper venue. I grant the motion to
dismiss because I lack personal jurisdiction over Southern.
I. Subject Matter Jurisdiction

Southern’s argument that this case should be dismissed for
lack of subject matter jurisdiction is somewhat confused. It was
Southern who initially invoked the subject matter jurisdiction of
this court when it filed a notice of removal. In the notice of
removal, Southern asserted that I could properly exercise diversity

jurisdiction over this case. (Notice of Removal @{Z 10-13.)


IN TRE UNITED STATES DISTRICT COURT
FOR TRE NORTHERN DISTRICT OF ILLINOIS DOCKE
EASTERN DIVISION ry ED
SEP 2 6 2993
CONTINENTAL CASUALTY COMPANY, and
COLUMBIA CASUALTY COMPANY,

Plaintiffs,

Vv.
No. 02 C 7683

THE SOUTHERN COMPANY; AMERICAN HOME
ASSURANCE COMPANY; BELLEFONTE
INSURANCE COMPANY, n/k/a
NORTHWESTERN NATIONAL INSURANCE
COMPANY; FEDERAL INSURANCE COMPANY;
GRANITE STATE INSURANCE COMPANY; .
BIGHLANDS INSURANCE COMPANY; and
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA,

Defendants.

MEMORANDUM OPINION AND ORDER

Plaintiffs Continental Casualty Company and Columbia Casualty
Company (collectively “CNA”) filed a declaratory judgment action in
Illinois state court against, among others, defendants The Southern
Company (“Southern”), American Home Assurance Company (“American
Home”), Bellefonte Insurance Company n/k/a Northwestern National
Insurance Company (“Northwestern”), Federal Insurance Company
(“Federal”), Granite State Insurance Company (“Granite State”)
Highlands Insurance Company ("Highlands”), and National Union Fire
Insurance Company of Pittsburgh (“National Union”). Southern is a
large utility company, insured by the other defendants. CNA is
also an insurer of Southern. CNA’s action sought a declaration of

the coverage obligations of itself and the other insurers with

UL


even if Southern regularly purchased coal directly from Illinois
companies, such purchases do not satisfy the minimum contacts
requirement for the assertion of general personal jurisdiction.
Helicopteros, 466 U.S. at 418 (“[M]ere purchases, even if occurring
at regular intervals, are not enough to warrant ... assertion of
[personal] jurisdiction over a nonresident corporation in a cause
of action not related to those purchase transactions.”) .5
Insurers’ evidence with respect to Southern’s guarantee of
certain Mirant transactions is likewise insufficient to establish
continuous and systematic contacts of Southern with Illinois. The
only connection between Southern’s acting as guarantor on Mirant
transactions and Illinois is that one of the underlying contracts
involved an Illinois entity. (Supplemental Resp. Opp’n Mot.
Dismiss Cross-cl. Ex. C.) This hardly constitutes continuous and
systematic contacts with Illinois. Insurers’ claim that Southern
owned and operated two synthetic fuel plants in Illinois also fails
to establish that Southern had minimum contacts with Illinois
sufficient to establish general personal jurisdiction. Far from
showing that Southern owned and operated synthetic fuel plants in

Illinois, the evidence submitted by Insurers shows only that two

5 In Helicopteros, the defendant, a Colombian corporation
providing helicopter transportation services in South America had,
over an eight-year period, purchased approximately 80% of its fleet
(as well as spare parts and accessories) from a company in Texas.
The Court held that these purchases were insufficient contacts to
warrant the exercise of general personal jurisdiction over the
defendant in Texas.

12